IN165 - Dixcart London Seminar 3 April 2008

Dixcart held its annual Tax and Trust Update on April 3rd in London, at the City of London Club. The number of attendees was the highest to date, generating an audience of over eighty lawyers, accountants, tax and trust advisers.

Topics and Speakers

Five topics were discussed:

• The implications of the 2008 UK Finance Bill for offshore structures
• Substance: the legal perspective
• Substance: the practicalities
• The financing of property transactions
• Malta as an attractive tax planning jurisdiction

The speakers were Samantha Morgan from Withers Worldwide, Chris Curmi of Deloitte Malta and Alex Magell and Mark Renouf from the Dixcart Group.

The Implications of the 2008 UK Finance Bill for Offshore Structures

Brief details of the changes are detailed below. Please contact Dixcart in the UK if you require any additional information:

• For existing trusts, distributions to non-domiciled UK resident beneficiaries arising after 6 April 2008 are taxed if matched with gains arising after 6 April 2008. The distributions are not taxed if matched with gains arising before 6 April 2008.
  
• As detailed above, the matching of gains within trusts has been changed so that later gains are matched against earlier payments. This means that most payments are likely to be matched at the 18% rather than the 28.8% rate.
  
• An individual who has been resident in the UK for seven out of the previous ten tax years will now need to pay £30,000 to claim the benefit of the remittance basis of taxation. Non-UK income and gains can be used to pay this without a charge to tax, provided the money is transferred directly to HM Revenue and Customs.
  
• The residence rules have been changed so that days of arrival and departure are no longer ignored and an individual will be resident in the UK in any day in which he is in the UK at midnight. There are special rules for people in transit.

Substance: the Legal Perspective

Trustees and directors must act independently and respect the structure.

• The trustees’ duties and obligations are towards the beneficiaries and before undertaking any transactions the trustees must understand the interests of the beneficiaries.
  
• Legal advisers have a responsibility to educate the settlor and to clearly explain his role. They should insist that he seeks independent advice.
  
• The trust documentation should be carefully drafted and understandable to the settlor. Due diligence, deliberations and decisions should all be carefully recorded.
  
• The considerations detailed above are important as if not adhered to, the structure can be attacked. The most likely sources of attack are from a beneficiary, by HM Revenue & Customs or by creditors.

Substance: the Practicalities

Increasingly organisations with activities in low tax jurisdictions are being asked to demonstrate a real base of operations and at the same time ensure that management, control and day to day decisions are being taken in that jurisdiction.

Evidence is likely to be required that rent is being paid and that employees are employed. Additional support services outsourced within the jurisdiction will also need to be being provided at a sensible, real cost.

Business Centres can be useful for organisations overseas, offering the flexibility of serviced offices. Staff can be provided and accounting and payroll services can be carried out. Business Centres are also likely to offer IT services including the provision of appropriate email addresses for that jurisdiction and assistance in meeting company compliance obligations.

Dixcart now operates Business Centres in the Isle of Man, Madeira and the UK.

The Financing of Property Transactions

If you have any questions relating to the financing of property transactions - sourcing and structuring in particular, please contact Mark Renouf at Dixcart in Guernsey mark.renouf@dixcart.co.gg. Mark has over twenty-five years experience working for a major bank and specialises in advising clients with high value property interests.

Malta as an Attractive Tax Planning Jurisdiction

Overseas shareholders enjoy low effective rates of tax: 0% on participating holding income, 5% on trading income and 10% on income from passive interest and royalties.

Features of the Malta tax system include:

• No withholding taxes on outbound dividends, interest and royalties
• No Controlled Foreign Corporation legislation
• No Thin Capitalisation rules
• No specific transfer pricing rules
• No capital or wealth rules
• No exit or entry taxes on movement of tax residence and/or corporate domicile
• No local taxes/stamp duties apply to a sale by a non-resident of shares in a local company

Forty-five Double Taxation treaties exist between Malta and other countries. Malta offers an OECD based network of tax treaties which embraces the EU Parent – Subsidiary Directive and the EU Interest and Royalties Directive.

Additional tax treaties are being negotiated. These include treaties with the following countries: Greece, Ireland, Jordan, Russia, Serbia and Montenegro, Singapore, Switzerland, Thailand, Turkey, United Arab Emirates and the USA.

Additional Information

If you require additional information on any of the topics discussed at the seminar please speak to your usual Dixcart contact or contact us.